New report shows increasing demands for financing, knowledge sharing

In Bangladesh, more than a million households without access to electricity are now getting off-grid solar power thanks to a US130 million project from the World Bank. In rural parts of the developing world, the International Finance Corporation’s (IFC) recently-launched Global Index Insurance Facility will help farmers get the insurance they need to protect against catastrophic weather that can destroy fields and livelihoods. The IFC facility focuses on emerging markets like Sub-Saharan Africa where farmers and agricultural workers make up 60% of the work force but most cannot find crop coverage. The Bangladesh and Africa stories are just two examples from around the world, of developing countries looking for solutions to help deal with climate change as part of their development action.

The jury is in on climate change and it is clear that it is the poorest and most vulnerable countries that will suffer most from its impacts---increased drought and flooding, sea level rise and dysfunctional and unpredictable weather patterns. Those warnings have been heeded. Over the past year the developing world has been increasingly active on many fronts in the battle against climate change.

Despite the global financial crisis and the resulting economic downturn, the past year has witnessed unprecedented demand from developing countries for World Bank Group support in their efforts to address development and climate change as interlinked challenges, according to a new World Bank report. Released yesterday, the Progress Report on the Strategic Framework for Development and Climate Change documents the Bank Group’s growing response to these demands. It is an interim report on the 2008 strategy which provides a roadmap for the World Bank Group’s climate action for fiscal years 2009-2011.

Developing countries are asking for a broad range of assistance, including help with climate resilient development, adaptation mechanisms, clean technology, and energy efficiency and renewable energy financing. The Latin America and Caribbean Region alone developed an IBRD (International Bank for Reconstruction and Development) portfolio of more than 180 country-led activities with climate change adaptation and mitigation co-benefits totaling more than US$7.3 billion.

“Working with partners, we have also undertaken analytical work that has helped to better understand what the potential risks from climate change for the poorest and the most vulnerable countries are and how the Bank and other development assistance agencies can help these countries in building climate resilience into their development process,” said Warren Evans, the World Bank’s Director of Environment.

Making development climate resilient has emerged as a major theme in supporting poverty reduction and economic growth in Sub-Saharan Africa. From addressing drought risk in Ethiopia (second phase US$175 million) to watershed management in Kenya and Malawi (US$75.5 million), Africa is rapidly increasing its efforts to grapple with development challenges in a changing climate.

Toga Gayewea McIntosh, the Executive Director at the World Bank for a number of African countries among them Botswana, South Africa and Kenya said, "The continuing uncertainty about the future of global climate policy and financing mechanisms represents the greatest challenge ...in the case of Africa, weak capacity and limited resources make the challenges facing Africa much more daunting and therefore much more assistance is needed beyond the current levels. This is where the IDA 16 could play a major role".

“Climate change is increasing the development challenge, most markedly in the poorest countries,” said Katherine Sierra, Vice President for Sustainable Development at the World Bank. “From disaster risk reduction programs integrating climate adaptation to mobilizing almost US$1 billion for the Pilot Program for Climate Resilience, we have significantly increased the ability of the Bank Group working with other Multilateral Development Banks, the UN, bilateral agencies, civil society, and private sector partners to respond to the climate change priorities of many of the most vulnerable developing countries.”

To meet the surging demand, the Bank Group has expanded its support to climate-resilient and low carbon investments. Working with multilateral development banks and UN agencies, the Bank Group is helping Bangladesh, Bolivia, Cambodia, Mozambique, Nepal, Niger, Tajikistan, Yemen and Zambia to scale up adaptation action through the Climate Investment Funds (CIF) Pilot Program for Pilot Resilience.

In addition, two regional programs – in the Caribbean and South Pacific – target small island states. The Bank Group-managed CIF Clean Technology Fund has endorsed US$4.4 billion of concessional finding in 13 investment plans that are expected to mobilize some US$36 billion in public and private resources for activities in 12 countries, along with one regional program in the Middle East and North Africa that will accelerate the development of Concentrated Solar Power.

Making climate change action part of development strategies: Developing country efforts to address climate related considerations in their broader economic growth and poverty reduction agenda is evident―more than 80 %of all Country Assistance or Partnership Strategies with developing countries during the first months of this fiscal year substantially address climate change issues.

Another sign of developing country action is a new and growing generation of operations that address policy and institutional developments needed to tackle climate change. There was US$6 billion in such operations addressing climate change considerations over FY2009 and the first half of FY2010. These include loans to Mexico, Brazil, Turkey, Morocco, and Indonesia. Poorer countries, supported by the International Development Association (IDA), have so far requested four such operations.

Accelerating the uptake of renewable energy and energy Efficiency: Fiscal year 2009 marked an all-time record in World Bank Group renewable energy (RE) and energy efficiency (EE) financing at US$3.3 billion. There was an 88% increase in new RE/EE commitments compared against an expected annual average increase of 30%. In Uganda, the Bank Group collaborated with the Global Environment Facility (GEF) to finance a renewable energy project for US$76 million. IDA countries are in the process of submitting expressions of interest to the Program for Scaling-Up Renewable Energy in Low Income Countries (SREP) (US$292 million) The International Finance Corporation’s (IFC) new renewable energy commitments increased five-fold in FY2009 from US$115 million to US$587 million.

“Climate change is a corporate strategic priority for the IFC, we are actively increasing climate-positive investing in all sectors of the economy, and seeking new forms of partnership to leverage all forms of climate finance” said Rachel Kyte, Vice President for IFC’s Advisory Services. “FY2009 was the first year that more than 50% (both in numbers and dollar amounts) of IFC power projects committed represented renewable energy projects, and that will grow.”

Involving the private sector is a key element of long term climate smart development. IDA counts on a range of instruments to achieve this. For example, a US$400 million IDA Partial Risk Guarantee along with a US$200 million IDA credit for the Nigeria Electricity and Gas Improvement Project is helping reduce greenhouse gas emissions through connecting users to cleaner grid-based generation.

Forests high on developing countries climate change agenda: Forest management presents an opportunity for tropical and sub-tropical countries to contribute to reducing global emissions while improving livelihoods. The US$558 million CIF Forest Investment Program (FIP) will support developing country efforts to reduce deforestation and forest degradation and promote sustainable forest management that leads to emission reductions and the protection of carbon reservoirs, (REDD+). This program complements the World Bank-facilitated Forest Carbon Partnership Facility (FCPF), which involves 37 tropical and sub-tropical countries. The FCPF has mobilized US$160 million for capacity building and performance-based payments to pilot projects.

Responding to client priorities, the WBG has strengthened the operational links between climate adaptation and disaster risk management: The Global Facility for Disaster Risk Reduction and Recovery (GFDRR) serves as a knowledge hub and catalyst to promote the integration of hazard risk management into the World Bank’s development efforts. As such, climate change adaptation is an integral part of GFDRR’s mission and business plan, which includes mainstreaming disaster risk reduction and climate change adaptation in country development strategies and operations by supporting a country-led and managed implementation of sound risk management principles. Disaster risk reduction serves as a first line of defense in adapting to climate change; therefore, GFDRR has been financing disaster risk reduction programs that build adaptive capacities in its 20 priority countries. GFDRR has also been facilitating the development of integrated approaches and coordinated implementation of national disaster risk reduction and climate change adaptation interventions.

In FY09, 12 GFDRR projects of over $4 million focused on climate change adaptation issues in the Africa Region , East Asia and the Pacific, Latin America and the Caribbean, Middle East and North Africa, South Asia and at the global level.

“What we see from our experience is that the developing world is stepping up to act on the climate change issue. However, financing remains very limited. The developed world has to make sure that the numbers add up to what developing countries need,” said Kseniya Lvovsky, Program Manager, who led the Bank Group team preparing the Progress Report on the Strategic Framework on Development and Climate Change.

In Copenhagen in December 2009, at the UN climate change conference, developed countries sent a vital political signal that they are prepared to mobilize US$30 billion in ‘new and additional” resources by 2012 for developing countries, with a view to increasing resources to US$100 billion a year by 2020. Immediate steps to make these additional resources a reality, together with progress to address uncertainty about carbon markets and other future financing mechanisms, will shape the scale and speed of climate action in developing countries.